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This is excellent reporting and excellent analysis of the situation. The one thing I'd add is that as much as insurance companies are clearly screwing consumers, there's no good long-term way to insure property in a state that will eventually be underwater and remain profitable. There's really no good solution to this problem, but what the Legislature is doing here is just about the worst option.

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Hi Jason - first, thank you for advocating so strongly for consumers, it's important work. However, a lot of times in public policy there are issues where the first order intended effect is positive, or at least noble, but the second and third order (unintended) effects are negative. One way attorneys' fees is one of those.

Insurance companies in every state are very highly regulated - they can face very significant penalties for not adhering to the insurance contract. The regulator also approves their pricing, underwriting and contract terms and will not approve rates that lead to an actuarial profit above 5%.

That is not to say that insurance companies will always make a 5% profit every year, since part of the insurance business (especially in places with a lot of weather volatility like Florida) is that profitability can swing a lot from one year to the next, depending on the weather. However, the Office of Insurance Regulation in Florida has experienced actuaries whose job it is to evaluate those filings and not approve them if they have excessive profit.

Florida is the only state in the whole country that has one way attorneys fees for insurance. It is also the only state in the whole country where insurance is so expensive and so difficult to get. It is also a state where most of the major insurance companies have left, or greatly diminished their presence.

One way attorney fees have created a situation where frivolous lawsuits are brought against property insurance companies, seeking damages well above what is actually justified by the damage. That is why Florida accounts for roughly 8% of homeowners insurance claims in the US and almost 80% of homeowners insurance lawsuits in the US (as calculated from National Association of Insurance Commissioner data).

https://www.insurancejournal.com/news/southeast/2021/04/14/609721.htm

It is very clear that the one way attorney fees laws are the main cause of the price and availability issues in Florida.

You are positioning this as a fight between insurance companies and consumers, which it is not. The excessive litigation drives increased loss costs for insurers and reinsurers, which results in higher prices and less availability for consumers for two reasons: 1. Insurers and their investors will not continue to do business here if they are consistently losing money. 2. The solvency division of the state regulators will not allow the insurance companies to underprice such that they are losing money consistently (since it's also bad for consumers when insurance companies go out of business).

The extra money collected from the insurance companies largely benefits the attorneys, not the litigious policyholders (https://www.propertycasualty360.com/2021/12/28/florida-personal-lines-coverage-reaches-crisis-levels-part-1/). And the non-litigious policy holders end up paying the bill indirectly through higher rates.

So this is really a conflict between plaintiffs lawyers and insurance consumers.

There is very little risk to consumers in changing this law, they will still have the same significant protections consumers in other states have and they likely will see insurance get easier to get and stop increasing in price so much each year.

However, there is a risk to doing nothing, since the current trend of increasing prices and reduced availability is likely to continue. For example even in a year where there wasn't a hurricane, 2021, insurance companies in Florida lost about $1B. In fact, in the past year UPC, Fednat, St. Johns (3 of the top 5 carriers in Florida), along with some smaller carriers such as Southern Fidelity and Weston, all went insolvent. The remaining insurance companies will need to raise their prices by at least that much to remain solvent.

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/losses-mount-for-many-fla-property-insurers-in-2021-69498985

https://www.artemis.bm/news/florida-reinsurance-costs-could-reach-breaking-point-warns-am-best/

It's not completely intuitive, but the bill currently in the Senate is customer friendly and will benefit all homeowners in Florida.

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Sorry, but much of this is wrong. The fee statute has been around for over 100 years - it is not the cause of recent market turmoil, nor is it unique to Florida. Many states allow policyholders to recover their attorneys fees. Here's the one-way fee statute in New Hampshire: "491:22-b Insurance Actions; Costs and Attorneys' Fees. – In any action to determine coverage of an insurance policy pursuant to RSA 491:22, if the insured prevails in such action, he shall receive court costs and reasonable attorneys' fees from the insurer."

If you truly believe litigation is the problem with Florida's property insurance market, you should start by reading the article below. Some highlights:

- "Under state law, the Department of Financial Services is required to report the causes behind each insurance company’s insolvency. None of these reports about the seven companies that have gone insolvent for the last two years have been released."

- "Financial autopsies on companies that went insolvent between 2011 and 2018 have repeatedly blamed high salaries and fees to affiliated companies. In one case, the autopsy said one insurer’s officers were 'stripping (their) company of cash.'"

- "Of the reports for the companies that have gone insolvent between 2008 and 2018, none cite litigation as a reason for the companies’ demise."

https://www.tampabay.com/news/florida-politics/2022/12/11/property-insurance-compensation-executives-legislature-special-session/

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It is a well established fact that Florida has much more litigation of property insurance - about 80% of lawsuits nationally, relative to about 8% of claims nationally.

In Florida there are lots of ads on the radio and billboards for attorneys who want to sue insurance companies, that is not typical in other states.

What is your alternate explanation for that disparity?

Barry Gilway runs Citizens, the state-owned insurance company, and has no skin in the game:

https://floridapolitics.com/archives/557611-citizens-board-officials-cite-lawsuits-as-root-problem-of-insurance-crisis/

He believes that the lawsuits are the main cause of rate increases and insolvencies. That the state-backed nonprofit is facing the same litigation issues refutes the case you are making that the lawsuits and high prices are due to poorly operated insurance companies.

This is an issue that has been impacting Citizens (and the taxpayers) for quite a while - https://floridapolitics.com/archives/231735-altmaier-cabinet/

The only reason that Citizens did not increase rates further was they are legally capped - https://www.wptv.com/money/real-estate-news/office-of-insurance-regulation-rate-hearing-for-citizens-property-insurance

Their actuarial indication (the price increase they would need to breakeven) this spring was 36%, and that was before the reinsurance rate increases that were large this year, and before Hurricane Ian.

Reinsurance rates are expected to increase even further this year which will compound the situation. Reinsurers are building the extra losses from litigation into their rates.

https://www.artemis.bm/news/reduced-reinsurance-appetite-to-compound-florida-challenges/

https://www.apci.org/media/news-releases/release/72898/

David Altmaier, the Commissioner for the Florida Department of Insurance laid out a case for fixing the market with tort reform, some of which were drawn from successful tort reform efforts in Texas - https://floir.com/siteDocuments/ChairIngoglia04022021.pdf

Like Barry, David has no skin in the game, he is a public servant, and a good one, and has studied this issue in depth.

We can certainly maintain a system where litigation is at current (or increased) levels, but it will absolutely increase the cost and reduce availability of insurance.

It also will result in Citizens (the state owned insurer of last resort) having a much larger market share than it has currently. Citizens had 500,000 policies at the end of 2020, has more than 1M now and is widely expected to surpass 1.5M by the end of next year on current trend.

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You don't respond to the evidence that insurers are funneling money to investors and execs, and you don't address the OIR reports on the most recent insolvencies that say nothing about litigation. Instead, your response is that Florida attorneys' have billboards, so they must be the problem. This doesn't seem like a worthwhile conversation, but I'll give you a few more things to consider.

First, Gilway is not a neutral source (https://www.citizensfla.com/-/barry-gilway) - he's been with the industry his entire career. (For the record, Altmaier is potentially more credible, but he's become a mouthpiece for the CFO in this process and we just learned today that he's leaving - I'd be willing to wager on where he'll end up next. Others like Lisa Miller have left OIR to become industry lobbyists.)

Second, if you follow the Citizens' claims committee meetings, you know that Citizens already has a plan to eliminate all litigation. The short version is that last year's reforms have worked - all payment disputes will go to appraisal, and all claim denials will go to an administrative hearing under a new policy endorsement being issued in February. It is likely that Citizens will have almost no litigation starting next year. I tweeted about this here: https://twitter.com/dutytodefend/status/1594508440214323200?s=20&t=iGJ9Kce87vjh0IVwc_oygw

Third, there's too much property litigation in FL but it's not because of the fee statute. Plaintiffs are winning these cases and getting paid. That means insurers are making bad claims decisions and underpaying or denying valid claims. If insurers were winning all these cases, the litigation would dry up - plaintiffs' attorneys are going to work for free.

Fourth, it's not clear that getting rid of the fee statute will significantly reduce the litigation. Plaintiffs can still get attorneys fees in a bad faith case per section 624.155, but they can only get those fees if they win at trial. So insurers still have fee exposure, and plaintiffs may be more inclined to take their cases to trial so they can seek fees in the bad faith case.

Fifth, there's no reason to get rid of the fee statute because insurers are already selling policies that include a mandatory arbitration endorsement with a waiver of the fee statute. Policyholder can give up their right to litigate for a discount - of up to 20%. That's hardly consistent with the industry's claims that litigation has driven premiums up 200-300%. But why not give policyholders the choice - and guarantee a discount? Why would the legislature take this away and get nothing guaranteed in return?

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Excellent response overall, and your third point really resonates with everything said during the Senate floor debate today. Some members have been asking for data on, among other things, the percentage of claims where plaintiffs were victorious, and they've been denied this info by OIR since they've requested it.

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Another fertile ground for investigation would be how much insurers pay for their own attorneys to try to block people from getting paid.

I do employment litigation for employees, in an area of law that has had one way fee shifting since the laws were passed. In one case that we won at trial a couple of years ago, our fees were over $300,000. I recently learned that defense counsel was paid @$750,000. Not to put too fine a point on it, but they could have settled the entire case before trial for half of what they paid their lawyer to lose.

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Your argument is flawed and in clearly in bad faith. Insurance companies don’t have to pay attorney’s fees unless they lose. Under Rule 11, attorney’s fees can already be assessed against parties filing frivolous claims.

The fact is that insurance companies refuse to pay what they contractually owe because they have deep pockets and can wear people down, especially when those people have just suffered a financial loss. I hope your mother doesn’t know what you do, as I’m sure she would be thoroughly ashamed.

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Hi Matt - this is a public policy Substack and my assumption is the comments are meant to be for public policy discussion. Your ad hominem attack against my mom isn't appropriate.

The fact is that one way attorneys fees are uncommon in insurance law and uncommon in law generally. Typically, either each side pays its own fees, or the loser pays the winner's fees.

One way attorneys fees create an uneven outcome, where the lawfirms can make a lot of money when they win (part of the settlement, plus their fees, plus a multiplier in many situation) and lose little when they lose, but the insurance company has to bear its own legal costs in both situations. Since the outcome is tilted in favor of the lawfirm, it creates an incentive to sue which causes the litigation rate to be higher in Florida, which increases loss costs which increases consumer prices.

The legislature is appropriately worried about consumers, and is trying to lower loss costs .

The most important argument in this whole debate is that most other states don't have one way attorneys fees and their customers are getting their claims paid *and* enjoying lower insurance prices than Florida consumers face. The big difference is that you don't have the same legal-industrial complex in those other states.

The current situation also creates an incentive for roofers to market customers a "free roof" - for example - https://ibb.co/27kwHGh (fyi - this text message was sent over the summer in Florida, it had been several years since the last hurricane). The roofers know the insurance company is likely to settle given how the odds are stacked against them. They are also able to further monetize from marketing fees and referrals from the attorneys, for example:

https://www.floridatrend.com/article/34495/attorney-scot-strems-is-the-poster-child-of-the-insurance-crisis

Your argument about greedy deep pocketed insurance companies abusing consumers is not correct for a few reasons:

1. 71% of the money recovered in these lawsuits is going to attorneys and only 8% is going to consumers - https://www.insurancejournal.com/news/southeast/2021/01/20/598034.htm

2. The largest insurer in Florida, and the largest target of these lawsuits, is Citizens, with about 15% of the total market and is a nonprofit. Citizens has no financial incentive to shortchange a consumer. Furthermore, the transfer from Citizens to the attorneys is coming directly from taxpayers. That situation is exacerbated because Citizens has historically been able to reinsure much of its risk, which is no longer true because the reinsurers are sick of their losses being inflated by the litigation abuse.

3. The second largest homeowners insurer in Florida is State Farm, similarly a non-profit which has no incentive to abuse consumers.

4. There exist other mechanisms for enforcing good conduct of insurance companies with market conduct exams and fines.

https://www.nbcnews.com/news/us-news/roofing-scams-florida-property-insurance-hurricane-rcna29649

https://www.abcactionnews.com/news/price-of-paradise/homeowners-insurance-soars-for-florida-residents-as-roofing-scams-continue

https://www.roofingcontractor.com/articles/96801-florida-dfs-arrests-two-roofing-contractors-in-insurance-fraud-scheme

https://www.insurancebusinessmag.com/us/news/breaking-news/floridas-insurance-woes-caused-by-two-factors--report-416302.aspx

What is being proposed in the legislature would normalize Florida's insurance laws to be more typical relative to other states and likely reduce the number of lawsuits and and reduce consumer prices.

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As to financial incentives for nonprofits: I used to work for a non-profit. The people who work for nonprofits have EVERY incentive to maximize net revenue, because that’s how they get their pay increases and bonuses. How much is the CEO of this nonprofit insurer making?

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Sean, you aren’t by any chance being paid with insurance company money?

As far as your Mom is concerned, I didn’t attack or disparage her; I disparaged your arguments and said she would likely be ashamed of you for promoting a false narrative intended to help insurance companies avoid paying their policy holders.

As to insurers being unable to recover their fees: If the case is frivolous they can recover the fees from the lawyers. The fact that they are having to pay fees means the cases not only weren’t frivolous, but there was sufficient risk of loss that they paid them to avoid losing more.

Regarding the percentage to the insured vs. the attorneys: Yes, a percentage of a $15,000 claim is not sufficient to cover the cost of an attorney. This is why, for example, federal civil,rights and discrimination claims have the same one way fee shifting. The failure to pay such a claim, however, would break many people . The insurers know this, which is why you are being (I suspect) paid to make these posts.

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Wonderful reporting, explained well. Thanks for posting!

My only Q is regarding how this only involved property insurance policies. Can you give an example as to how this would play out for the average citizen?

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Imagine you are a homeowner. Your house is insured. The roof is damaged by a hurricane, tornado, or hail. You file a claim and they refuse to pay the $20,000 to repair or replace your leaking roof.

You talk to a lawyer, who agrees you have a slam dunk case and quotes you an estimate of $30,000 to sue the insurance company. Without fee shifting, what are you going to do?

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Thanks, that's a helpful example and is obviously very applicable for Floridians!

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